Exchange-traded funds (ETFs) are investment vehicles that trade like a stock but give investors ownership of a broad range of stocks or other assets. ETFs offer investors an appealing alternative to owning individual stocks. They can also be great complements to an investor's stock portfolio.
Exchange-Traded Fund (ETF)
There are all kinds of ETFs available. Some track major indexes, such as the S&P 500 or the Nasdaq Composite. Others give investors exposure to specific regions, such as China or emerging markets. And some ETFs concentrate on certain sectors, such as technology or banking, or specific types of stocks, like dividend or growth stocks.
In a challenging market environment, ETFs can help reduce the risks of owning an individual stock, as they tend to be less volatile. Although they're similar in principle to mutual funds, they're easier to buy and trade than typical mutual funds and tend to have lower fees. If you're looking for ETFs to invest in, keep reading to see seven of the best.
Top seven ETFs to buy now
There are hundreds of ETFs to choose from. Here are seven of the best ETFs to buy this month.
Exchange-Traded Fund (ETF) and Ticker | Assets Under Management (AUM) | Expense Ratio | Description |
|---|---|---|---|
Vanguard S&P 500 ETF (NYSEMKT:VOO) | $793.6 billion | 0.03% | Fund that tracks the S&P 500 |
Invesco QQQ Trust (NASDAQ:QQQ) | $362.8 billion | 0.18% | Fund that tracks the Nasdaq-100 |
Vanguard Growth ETF (NYSEMKT:VUG) | $179.8 billion | 0.03% | ETF that invests in large-cap U.S. growth stocks |
iShares Core S&P Small-Cap ETF (NYSEMKT:IJR) | $90.1 billion | 0.06% | Fund that tracks the S&P SmallCap 600 index |
Schwab U.S. Dividend Equity ETF (NYSEMKT:SCHD) | $84.0 billion | 0.06% | ETF that invests in 100 high-yielding U.S. stocks with histories of increasing their dividends |
Vanguard Total Stock Market ETF (NYSEMKT:VTI) | $546.4 billion | 0.03% | Fund that holds more than 3,500 U.S. stocks of all sizes |
iShares Core MSCI Total International Stock ETF (NASDAQ:IXUS) | $50.6 billion | 0.07% | ETF that holds around 4,250 international stocks of all sizes |
1. Vanguard S&P 500 ETF
NYSEMKT: VOO
Key Data Points
NASDAQ: QQQ
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3. Vanguard Growth ETF
NYSEMKT: VUG
Key Data Points
NYSEMKT: IJR
Key Data Points
NYSEMKT: SCHD
Key Data Points
6. Vanguard Total Stock Market ETF
NYSEMKT: VTI
Key Data Points
NASDAQ: IXUS
Key Data Points
How to choose an ETF
You should evaluate the following factors when choosing an ETF:
- Whether the investment strategy (i.e., growth, income, or specific theme) fits your needs
- How its expense ratio compares to similar funds
- Its past performance compared to similar funds and its benchmark
- Its size and trading volume versus other similar funds.
- Whether it uses any leverage
Should you invest in ETFs?
Exchange-traded funds can work for almost any kind of investor, regardless of your investing style or the type of stocks you're looking to invest in. Hundreds of ETFs offer exposure to a wide range of sectors and investment goals, including dividend and growth strategies. These funds have several benefits, including:
- Potentially lower risk and less volatility compared to investing in individual stocks.
- A passive investment with a low management fee.
- Built-in diversification from day one.
- Targeted investment in a trend or theme through a simple investment vehicle.
- Liquidity (ETFs trade like stocks).
- Very transparent investments.
- A possible source of passive income, depending on the ETF's investment strategy.
However, there are also some drawbacks to investing in ETFs that investors need to consider, including:
- They have the potential to underperform a portfolio of individual stocks.
- The higher management fees of some funds can eat into their returns.
- Leverage and other factors can cause some funds to deliver poor long-term performance.
For most investors, holding at least one or two high-quality ETFs makes sense, especially if you want to eliminate some of the work of picking individual stocks. The list above offers a good starting point if you're looking for the best ETFs to buy.
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FAQ
Buying the best ETFs: FAQ
About the Author
Matt DiLallo has positions in Amazon, Apple, Broadcom, Chevron, Schwab U.S. Dividend Equity ETF, and Verizon Communications and has the following options: short May 2026 $280 calls on Apple. The Motley Fool has positions in and recommends Amazon, Apple, Chevron, Microsoft, Nvidia, Vanguard Growth ETF, Vanguard S&P 500 ETF, Vanguard Total Stock Market ETF, and iShares Core S&P Small-Cap ETF. The Motley Fool recommends Broadcom and Verizon Communications. The Motley Fool has a disclosure policy.
